Boning Up at Genzyme

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The pharmaceutical business is known for its blockbusters. Pfizer (NYSE: PFE) and other mammoth manufacturers go after big opportunities, so their efforts become embodied in multibillion-dollar drugs like Lipitor. By contrast, the biotechnology industry frequently concentrates on areas that the giants neglect. Although large biotech companies have produced a few blockbusters, the biotech sector overall is still characterized by small players concentrating on one or two niche markets.

Genzyme (Nasdaq: GENZ) has put a different spin on the biotech model by aggregating lots of niche drugs under one roof. On Tuesday, the firm announced that it will continue on this path with a planned acquisition of Bone Care International (Nasdaq: BCII). In exchange for $600 million in cash, Genzyme will gain Bone Care's Hectorol line of products indicated for the treatment of secondary hyperparathyroidism in patients undergoing kidney dialysis.

Hectorol is far from a blockbuster opportunity, given that Bone Care expects the medication's sales to reach between $82 million and $83 million. But the purchase makes sense for Genzyme, since Hectorol can be used in concert with Genzyme's Renagel, which is designed to control serum phosphorus levels in chronic kidney disease. Genzyme expects that by using its sales and marketing heft, and by introducing Hectorol to overseas markets, it can expand sales significantly.

So by all counts, the deal looks like another smart purchase for Genzyme. The only worry might be that with its recent string of acquisitions, the company is spreading itself too thin. However, with just 140 employees as of June 2004, Bone Care shouldn't present too much integration risk. As for financing, Genzyme indicated that it has access to $1.5 billion in cash and equivalents, although that amount includes undrawn credit. But based on current evidence, Genzyme's acquisition strategy still seems to make sense.

For related news, check out these Foolish articles:

• Genzyme's Acquisitions Pay Off
• AstraZeneca Buys Into Cambridge Antibody
• Genzyme's Oncology Acquisitions

Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.